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Secretary of Labor Thomas E. Perez
Proposed Exemptions; Retirement Plan of Plumbers and Steamfitters Local No. 489 of Cumberland, Maryland (the Plan) et al. [Notices] [04/16/2001]

EBSA (Formerly PWBA) Federal Register Notice

Proposed Exemptions; Retirement Plan of Plumbers and Steamfitters Local No. 489 of Cumberland, Maryland (the Plan) et al. [04/16/2001]

[PDF Version]

Volume 66, Number 73, Page 19532-19539


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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-10876, et al.]

 
Proposed Exemptions; Retirement Plan of Plumbers and Steamfitters 
Local No. 489 of Cumberland, Maryland (the Plan) et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (the Act) and/or the Internal 
Revenue Code of 1986 (the Code).
Written Comments and Hearing Requests
    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
requests for a hearing should state: (1) The name, address, and 
telephone number of the person making the comment or request, and (2) 
the nature of the person's interest in the exemption and the manner in 
which the person would be adversely affected by the exemption. A 
request for a hearing must also state the issues to be addressed and 
include a general description of the evidence to be presented at the 
hearing.

ADDRESSES: All written comments and requests for a hearing (at least 
three copies) should be sent to the Pension and Welfare Benefits 
Administration, Office of Exemption Determinations, Room N-5649, U.S. 
Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210. Attention: Application No. __, stated in each Notice of Proposed 
Exemption. The applications for exemption and the comments received 
will be available for public inspection in the Public Documents Room of 
the Pension and Welfare Benefits Administration, U.S. Department of 
Labor, Room N-5638, 200 Constitution Avenue, NW., Washington, DC 20210.
    Notice to Interested Persons: Notice of the proposed exemptions 
will be provided to all interested persons in the manner agreed upon by 
the applicant and the Department within 15 days of the date of 
publication in the Federal Register. Such notice shall include a copy 
of the notice of proposed exemption as published in the Federal 
Register and shall inform interested persons of their right to comment 
and to request a hearing (where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990). 
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 
of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the 
Secretary of the Treasury to issue exemptions of the type requested to 
the Secretary of Labor. Therefore, these notices of proposed exemption 
are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

Retirement Plan of Plumbers and Steamfitters Local No. 489 of 
Cumberland, Maryland (the Plan) Located in Cumberland, Maryland

[Application No. D-10876]

Proposed Exemption

    The Department of Labor is considering granting an exemption under 
the authority of section 408(a) of the Act and section 4975(c)(2) of 
the Code and in accordance with the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a) and 406(b)(1) and 
(b)(2) of the Act and the sanctions resulting from the application of 
section 4975 of the Code, by reason of section 4975(c)(1)(A) through 
(E) of the Code, shall not apply to the sale (the Sale) of certain real 
property (the Property) to the Plan by the Plumbers and Steamfitters 
Local No. 489 (the Union), a party in interest with respect to the 
Plan, provided the following conditions are satisfied:
    (a) The terms and conditions of the transaction are no less 
favorable to the Plan than those which the Plan would receive in an 
arm's-length transaction with an unrelated party;
    (b) The Sale is a one-time transaction for cash;
    (c) The Plan incurs no expenses from the Sale;
    (d) The Plan pays the lesser of $100 or the fair market value of 
the Property; and
    (e) An independent fiduciary will approve and enforce the terms of 
the proposed transaction, if granted.

Summary of Facts and Representations

    1. The Plan is a multiemployer defined benefit pension plan. As of 
January 21, 2000, the estimated number of participants and 
beneficiaries affected by the proposed transaction is 199 and the 
approximate aggregate fair market value of the Plan's total assets is 
in excess of $14,000,000. The Plan is a Taft-Hartley trust fund 
established pursuant section 302(c)(5) of the Labor Management 
Relations Act which is intended to qualify under section 401(a) of the 
Code. The Plan is administered by a four member board of trustees (the 
Trustees) of whom two members are selected by the Union. The Plan is 
for employees covered by collective bargaining agreements between the 
participating employers and the Union, and for certain employees of the 
Plan and the Union.
    2. The Property is located at 2 Park Street, Cumberland, Maryland. 
The Property contains an area of 15,751

[[Page 19533]]

square feet. The subject Property is improved by a one story concrete 
block and part brick veneer commercial building measuring 126 feet in 
width by 50.5 feet deep containing 6,363 square feet.
    3. The Property was appraised by Dennis E. Perrin (the Appraiser), 
a state of Maryland Certified General Appraiser, employed by Perrin and 
Perrin, located in Cumberland, Maryland, who determined that the 
Property had a fair market value of $259,000, as of December 17, 1998. 
The Appraiser utilized in his valuation the highest and best use 
methodology for the Property.
    4. The Union proposes to sell the Property to the Plan for cash in 
a one-time transaction with no expenses incurred by the Plan. The 
agreement between the Plan and the Union permits the Plan for a period 
of 365 days from the date of the purchase to nullify the Sale. The 
applicant represents that the Union will receive $100 as consideration 
for the Sale.\1\
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    \1\ The applicant represents that it is contemplated that the 
Plan will lease a portion of the Property to the Union; and the 
Union will be responsible for all utilities and will perform all 
necessary maintenance and/or remodeling for the building, but that 
the Plan would pay real estate taxes. Additionally, the applicant 
represents that the transaction will satisfy the conditions of PTE 
76-1 and PTE 77-10 (41 FR 12740, March 26, 1976 and 42 FR 33918, 
July 1, 1977 respectively). The Department expresses no opinion as 
to whether or not the lease of a portion of the Property by the Plan 
to the Union as described herein satisfies the terms and conditions 
of PTE 76-1 and PTE 77-10. Furthermore, the Department is providing 
no relief for such lease transaction. Lastly, the Department notes 
that, although the Sale of the Property is the subject of a proposed 
exemption, the fiduciary of the Plan must still adhere to the 
fiduciary responsibility provisions of section 404 of the Act. Thus, 
although the proposed purchase price is just $100, the fiduciary of 
the Plan has a duty under section 404 to ensure that the purchase of 
the Property is prudent, taking into account the costs and benefits 
associated with ownership of such Property.
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    5. The applicant also represents that compliance with the terms and 
conditions of the requested exemption will be monitored and enforced by 
an independent fiduciary, Glenn J. Robinette (Mr. Robinette) of the Law 
Office of Glenn J. Robinette, located in Cumberland, Maryland. Mr. 
Robinette represents that he has extensive experience in the field of 
real estate and estate planning manners. Mr. Robinette represents that 
the proposed Sale is in the best interests of the Plan and is 
protective of the rights of the participants and beneficiaries of the 
Plan. Mr. Robinette represents that (i) the Sale will provide the Plan 
with an opportunity to acquire a valuable asset which will appreciate 
in value; (ii) the Sale will serve to further diversify the portfolio, 
since the Plan holds no realty at this time; (iii) the Sale will comply 
with the Plan's growth objectives; (iv) the purchase price of $100 is 
extremely low; and (v) the 365 days provided to the Plan to nullify the 
Sale is beneficial and necessary for the proposed transaction.
    6. The applicant represents that the Plan is prompted to take this 
action for the following reasons (i) the purchase of the Property would 
benefit the Plan in that it is a prudent investment of Plan assets and 
has potential for appreciation; (ii) the Plan will purchase the 
Property with a value greater than the purchase price; (iii) the value 
of the Plan assets will increase substantially upon the purchase of the 
Property;
    (iv) the purchase would provide diversification since the assets in 
the Plan are primarily invested in financial instruments and not real 
estate; and (v) the Plan maintaining the Property would provide a 
greater assurance that the Union will continue to exist and negotiate 
with participating employers so that contributions continue to be made 
to the Plan. The proposed transaction will be monitored and enforced by 
a qualified, independent fiduciary.
    7. In summary, the applicant represents that the proposed 
transaction satisfies the criteria of section 408(a) of the Act because 
(a) the Sale is a one-time transaction for cash; (b) the Plan will not 
incur any expenses from the transaction; (c) the Plan pays the lesser 
of $100 or the fair market value of the Property; and (d) the 
independent fiduciary will approve and enforce the terms of the 
proposed transaction.
    Notice to Interested Persons: Notice of the proposed exemption 
shall be given to all interested persons in the manner agreed upon by 
the applicant and Department within 15 days of the date of publication 
in the Federal Register. Comments and requests for a hearing are due 
forty-five (45) days after publication of the notice in the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: Khalif I. Ford of the Department, 
telephone (202) 219-8883 (this is not a toll-free number).

THS Profit Sharing Plan (the Plan) Located in Bedford Hills, New 
York

[Application No. D-10921]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 4975(c)(2) of the Code and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 
August 10, 1990). If the exemption is granted, the sanctions resulting 
from the application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) through (E) of the Code, shall not apply to the proposed 
sale (the Sale) by the Plan of two life insurance policies (the 
Policies) which insure Tim H. Shoecraft, the sole participant (the 
Participant), \2\ to the Shoecraft Family Trust Dated October 9, 1991 
(the Trust), which is a disqualified party with respect to the Plan 
under section 4975(e)(2) of the Code, provided that the following 
conditions are met:
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    \2\ Because Tim H. Shoecraft is the sole shareholder of 
Shoecraft and Associates and he is the only participant in the Plan, 
there is no jurisdiction under Title I of the Employee Retirement 
Income Security Act of 1974 (the Act) pursuant to 29 CFR 2510.3-
3(b). However, there is jurisdiction under Title II of the Act 
pursuant to section 4975 of the Code.
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    (a) The Participant is the insured under the contract;
    (b) Prior to the Sale, the Plan will afford the insured notice of 
the Sale and the opportunity to purchase the Policies;
    (c) The Sale will be for full and adequate consideration, based 
upon the cash surrender value of the Policies at the time of the 
transaction;
    (d) The Plan is authorized to purchase and own life insurance;
    (e) The amount received by the Plan as consideration for the Sale 
is at least equal to the amount necessary to put the Plan in the same 
cash position as it would have been in had it retained the contract, 
surrendered it, and made any distribution owing to the Participant of 
his vested interest under the Plan; and
    (f) The Plan is not required to pay any commissions, costs or other 
expenses in connection with the Sale.

Summary of Facts and Representations

    1. The Plan is a profit sharing plan which was created effective 
December 1, 1991. As of July 11, 2000, the Plan had net assets valued 
at approximately $60,000 and one participant, Mr. Shoecraft. The 
trustees of the Plan have full investment discretion and are comprised 
of the Participant and his wife, Marianne Shoecraft.
    The Participant is the sole shareholder of Shoecraft and 
Associates, a financial advisory company located in the State of New 
York. The Participant is also the settlor of the Trust. The Trust is a 
grantor trust, which is defined as a trust that is taxed at the 
settlor's tax rate because the settlor has the power to control the 
beneficial enjoyment of the trust, retains a reversionary interest in 
the trust, has administrative powers over the trust, has the power to 
revoke the trust, or benefits from the income of

[[Page 19534]]

the trust. The beneficiaries of the Trust are family members of the 
Participant.
    2. The Plan, the owner of the Policies, purchased the Policies from 
the Participant for their cash surrender values on December 1, 1992.\3\ 
The Participant is the insured under the Policies. The Policies were 
issued by the Massachusetts Mutual Life Insurance Company. The cash 
surrender values of the Policies are $2,748 (Policy Number 71042940 
valued at $1,375 + Policy Number 71042900 valued at $1,373 = $2,748). 
The cash surrender values of the Policies represent 4.58% of the fair 
market value of the assets of the Plan.
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    \3\ In this regard the Department notes that Prohibited 
Transaction Class Exemption 92-5 (PTCE 92-5) (57 FR 5019, February 
11, 1992) provides conditional exemptive relief for the sale, 
transfer, or exchange of an individual life insurance or annuity 
contract to an employee benefit plan from a plan participant on 
whose life the contract was issued, or from an employer, any of 
whose employees are covered by the plan. The Department is 
expressing no opinion as to whether the original acquisition of the 
Policies by the Plan satisfied the requirements of PTE 92-5.
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    3. The Participant no longer desires to maintain the Plan. He has 
not made contributions in several years and wishes to eliminate the 
reporting and administrative requirements. Upon termination of the 
Plan, the Plan must discontinue, liquidate or sell the Policies. The 
Participant, because he is uninsurable, wishes to maintain the Policies 
after the termination of the Plan. From an economic perspective, the 
Participant represents that the Trust is the ideal entity to purchase 
the Policies. Additionally, the Participant represents that the Trust 
allows for an allocation of the proceeds between the beneficiaries of 
the Policies on a needs basis. Accordingly, the Participant requests an 
administrative exemption from the Department in order to permit the 
sale of the Policies to the Trust.
    4. The Sale will be for adequate consideration, i.e., the greater 
of $2,748 or the cash surrender value of the Policies at the time of 
the transaction. Prior to the Sale, the Plan will afford the 
Participant notice of the Sale and the opportunity to purchase the 
Policies. If the Participant decides not to purchase the Policies and 
authorizes the Sale to the Trust, only then will the proposed Sale 
occur.
    5. The Participant represents that the proposed transaction would 
be administratively feasible because it would be a one-time transaction 
for cash. Furthermore, the Participant states that the proposed 
transaction would be in the best interest of the Participant and the 
Plan because the Plan would incur no commissions, costs, or other 
expenses as a result of the Sale.
    6. In summary, the Participant represents that the proposed 
transaction satisfies the statutory criteria for an administrative 
exemption under section 4975(c)(2) of the Code because:
    (a) The Participant is the insured under the contract;
    (b) Prior to the Sale, the Plan will afford the Participant notice 
of the Sale and the opportunity to purchase the Policies;
    (c) The Sale will be for full and adequate consideration, based 
upon the cash surrender value of the Policies at the time of the 
transaction;
    (d) The Plan is authorized to purchase and own life insurance;
    (e) The amount received by the Plan as consideration for the Sale 
will be at least equal to the amount necessary to put the Plan in the 
same cash position as it would have been in had it retained the 
contract, surrendered it, and made any distribution owing to the 
Participant of his vested interest under the Plan; and
    (f) The Plan will not be required to pay any commissions, costs or 
other expenses in connection with the Sale.

Notice to Interested Persons

    Because Mr. Shoecraft is the only participant in the Plan who will 
be affected by the proposed transaction, it has been determined that 
there is no need to distribute the notice of proposed exemption (the 
Notice) to interested persons. Comments and requests for a hearing are 
due thirty (30) days after publication of the Notice in the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department, 
telephone (202) 219-8883. (This is not a toll-free number.)

Phoenix Home Life Mutual Insurance Company (Phoenix) Located in 
Hartford, CT

[Application No. D-10943]

Proposed Exemption

    Based on the facts and representations set forth in the 
application, the Department is considering granting an exemption under 
the authority of section 408(a) of the Act and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 
32847, August 10, 1990).\4\
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    \4\ For purposes of this proposed exemption, reference to 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
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Section I. Covered Transactions

    If the exemption is granted, the restrictions of section 406(a) of 
the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1)(A) through (D) of the 
Code, shall not apply to (1) the receipt of common stock (Stock) of The 
Phoenix Companies, Inc. (the Holding Company), the parent of Phoenix, 
or (2) the receipt of cash (Cash) or Policy Credits, by or on behalf of 
any Eligible Policyholder of Phoenix which is an employee benefit plan 
(a Plan), including any Eligible Policyholder that is a Plan maintained 
by Phoenix or its affiliates (Phoenix Plan), in exchange for such 
Eligible Policyholder's membership interest in Phoenix, in accordance 
with the terms of a plan of reorganization (the Plan of Reorganization) 
adopted by Phoenix and implemented pursuant to section 7312 of the New 
York Insurance Law.
    In addition, if the exemption is granted, the restrictions of 
section 406(a)(1)(E) and (a)(2) and section 407(a)(2) of the Act shall 
not apply to the receipt and holding of the Stock, by a Phoenix Plan, 
whose fair market value exceeds 10 percent of the value of the total 
assets held by such Plan.
    The proposed exemption is subject to the following conditions set 
forth below in Section II.

Section II. General Conditions

    (a) The Plan of Reorganization is subject to approval, review and 
supervision by the Superintendent of Insurance of the State of New York 
(the Superintendent) and is implemented in accordance with procedural 
and substantive safeguards that are imposed under New York law.
    (b) The Superintendent reviews the terms and options that are 
provided to Eligible Policyholders of Phoenix as part of such 
Superintendent's review of the Plan of Reorganization and the 
Superintendent only approves the Plan of Reorganization following a 
determination that the Plan of Reorganization is fair and equitable to 
Eligible Policyholders and is not detrimental to the general public.
    (c) Each Eligible Policyholder has an opportunity to vote to 
approve the Plan of Reorganization after full written disclosure is 
given to the Eligible Policyholder by Phoenix.
    (d) Any determination to receive Stock, Cash or Policy Credits by 
an Eligible Policyholder which is a Plan, pursuant to the Plan of 
Reorganization, is made by one or more Plan fiduciaries which are 
independent of Phoenix and its affiliates and neither Phoenix nor any 
of its affiliates exercises any discretion or provides investment 
advice, within the meaning of 29 CFR 2510.3-21(c), with respect to such 
decisions.

[[Page 19535]]

    (e) In the case of the Phoenix Plans, an independent fiduciary with 
respect to the Phoenix Plans:
    (1) Exercises its authority and responsibility to vote on behalf of 
the Phoenix Plans at the special meeting of Eligible Policyholders on 
the proposal to approve the Plan of Reorganization;
    (2) Monitors, on behalf of the Phoenix Plans, the acquisition and 
holding of any Stock, Cash or Policy Credits received;
    (3) Makes determinations on behalf of the Phoenix Plans with 
respect to the voting and continued holding of any Stock held by such 
Plans until such holding is reduced so that it does not exceed the 
limits of section 407(a) of the Act;
    (4) Disposes of Stock exceeding the limits of section 407(a) of the 
Act within six months of the effective date of the Plan of 
Reorganization.
    (5) Provides the Department with a complete and detailed final 
report as it relates to the Phoenix Plans prior to the effective date 
of the demutualization.
    (f) After each Eligible Policyholder entitled to receive Stock is 
allocated a fixed number 37 shares of Stock (subject to possible 
adjustment as provided in the Plan of Reorganization), additional 
consideration is allocated to each Eligible Policyholder who owned 
participating policies based on actuarial formulas that take into 
account each participating policy's contribution to the surplus of 
Phoenix, which formula has been approved by the Superintendent.
    (g) All Eligible Policyholders that are Plans participate in the 
transactions on the same basis as all Eligible Policyholders that are 
not Plans.
    (h) No Eligible Policyholder pays any brokerage commissions or fees 
in connection with the receipt of Stock or in connection with the 
implementation of the commission-free purchase and sale program.
    (i) All of Phoenix's policyowner obligations remain in force and 
are not affected by the Plan of Reorganization.
    (j) The terms of the transaction are at least as favorable to the 
Plans as an arm's-length transaction with an unrelated party.

Section III. Definitions

    For purposes of this proposed exemption:
    (a) An ``affiliate'' of Phoenix includes--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with Phoenix. (For purposes of this paragraph, the term ``control'' 
means the power to exercise a controlling influence over the management 
or policies of a person other than an individual), and
    (2) Any officer, director or partner in such person.
    (b) The term ``Eligible Policyholder'' means a person who is (or 
collectively, persons who are) the owner(s) of one or more policies 
that are in force on the date of the adoption of the Plan of 
Reorganization.
    (c) The term ``Phoenix'' means Phoenix Home Life Mutual Insurance 
Company and any of its affiliates, as defined in paragraph (a) of this 
Section III.
    (d) The term ``Policy Credit'' means (a) for an individual or joint 
participating whole life insurance policy, the crediting of paid-up 
additions which will increase the cash value and death benefit of the 
policy; (b) for supplementary contracts issued under optional modes of 
settlement or annuities in the course of installment payment without a 
defined account value and that provide for the payment of additional 
interest, the crediting of an additional amount in the form of 
additional interest; (c) for supplementary contracts issued under 
optional modes of settlement or annuities in the course of installment 
payment without a defined account value not providing for the payment 
of additional interest, an increase in the installment payment amount; 
and (d) for all other individual or joint life policies and annuities, 
(i) if the policy or contract has a defined account value, an increase 
in the account value, to which the Company will apply no sales, 
surrender or similar charges, or that will be further increased in 
value to offset any of these charges, or (ii) if the policy or contract 
does not have a defined account value, the crediting of dividends under 
the policy or contract.

Summary of Facts and Representations

    1. Phoenix is a mutual life insurance company organized under the 
laws of the State of New York and subject to supervision and 
examination by the Superintendent. Phoenix is principally engaged in 
providing life insurance and annuities to individuals. It is authorized 
to transact life and health insurance in 50 states and the District of 
Columbia. As of December 31, 1999, Phoenix had total assets of 
approximately $19.6 billion (on a statutory accounting basis) and had 
more than $261 billion of life insurance in force.
    As a mutual life insurance company, Phoenix has no stockholders. 
Policyholders of a mutual life insurance company are ``members'' of the 
company, and, in that capacity, they are entitled to vote to elect 
directors of the company and would be entitled to share in the assets 
of the company if it were liquidated.
    Phoenix is the sole shareholder of PM Holdings, Inc. (Holdings), a 
holding company which is the sole or majority owner of a number of 
subsidiaries including life insurance companies, investment management 
companies, insurance brokers, broker-dealers, international business 
operations and trust companies. Holdings's most significant insurance 
company subsidiary is PHL Variable Insurance Company, a wholly-owned 
company which is primarily engaged in the sale and underwriting of 
variable annuity business. In addition, Holdings is the sole 
shareholder of W.S. Griffith & Co. Inc., a broker-dealer engaged in the 
sale and distribution of investment products of Phoenix and its 
subsidiaries. Holdings is also the sole shareholder of Phoenix Charter 
Oak Trust Company, which provides a full range of personal and 
institutional fiduciary services and life insurance trust services to 
Phoenix policyholders.
    Holdings has an approximate 60% ownership interest in publicly 
traded Phoenix Investment Partners, Ltd. (PXP). PXP and its 
subsidiaries provide a variety of investment management and related 
services to a broad base of institutional, corporate and individual 
clients. PXP's businesses include investment advisory (for mutual funds 
and institutional clients), broker-dealer and investment research 
operations, as well as financial consulting services. Holdings is a 
direct or indirect owner of numerous other foreign and domestic 
corporations and enterprises, none of which has substantial involvement 
with U.S. employee pension or welfare plans.
    2. As of April 1, 2000, Phoenix sold its group insurance business 
and therefore no longer sells or administers products in the employer-
sponsored welfare plan market (e.g., group medical, dental, life and 
disability insurance and administrative services only contracts). 
Phoenix continues, however, to reflect on its records several thousand 
group insurance contracts which have been reinsured on a 100% indemnity 
basis with an unrelated insurer which is performing most of the 
services for such contracts. It is anticipated that such business will 
soon be entirely written on the reinsurer's paper.
    While Phoenix remains active in the tax-sheltered annuity and 
individual retirement account market, it engages in few insurance 
product sales in the corporate qualified market. It maintains a group 
annuity product for a limited number of small 401(k) and profit

[[Page 19536]]

sharing plans; it also has a limited marketing effort for the sale of 
individual life insurance and annuity products in the corporate 
qualified market. The majority of the group and individual annuities 
issued by Phoenix to corporate qualified Plans and remaining on its 
books represent inactive cases.
    Largely as a result of Phoenix' past activity in the employee 
benefit plans market, Phoenix had remaining, as of December 31, 1999, 
approximately 22,000 in force policies and contracts held on behalf of 
employee pension and welfare benefit plans. These included 
approximately 15,000 policies and contracts funding pension and profit 
sharing (including Sec. 401(k)) plans and approximately 7,000 contracts 
providing welfare benefit plan coverage such as group life, short- and 
long-term disability, accidental death and dismemberment and group 
health coverage. In addition, Phoenix has approximately 24,000 annuity 
contracts funding 403(b) plans and individual retirement accounts. 
Phoenix no longer sells or administers group insurance policies or 
plans.
    Phoenix and PXP sponsor the following Plans, which are expected to 
be Eligible Policyholders (collectively referred to herein as the 
``Phoenix Plans''):
    (a) The Phoenix Home Life Mutual Insurance Company Employee Pension 
Plan (the Pension Plan) is a defined benefit pension plan. As of 
December 31, 1999, the Pension Plan had approximately 6,160 
participants.
    (b) The Phoenix Home Life Mutual Insurance Company Savings and 
Investment Plan (the Savings Plan) is a defined contribution plan. As 
of December 31, 1999, the Savings Plan had 3,002 participants.
    (c) The Phoenix Home Life Mutual Insurance Company Agent Pension 
Plan (the Agent Pension Plan) is a defined contribution plan. As of 
December 31, 1999, the Agent Pension Plan had 1,024 participants.
    (d) The Phoenix Home Life Mutual Insurance Company Agent Savings 
and Investment Plan (the Agent Savings Plan) is a defined contribution 
plan. As of December 31, 1999, the Agent Savings Plan had 535 
participants.
    (e) The Phoenix Home Life Mutual Insurance Company Employee Group 
Life Insurance Plan (the Group Life Plan) is a welfare benefit plan. As 
of December 31, 1999, the Group Life Plan had 2,889 participants.
    (f) The Phoenix Home Life Mutual Insurance Company Agent Group Life 
Insurance Plan (the Agent Group Life Plan) is a welfare benefit plan. 
As of December 31, 1999, the Agent Group Life Plan had 773 
participants.
    (g) The Phoenix Investment Partners, Ltd. Group Profit Sharing Plan 
and Trust (the PXP Profit Sharing Plan) is a defined contribution plan. 
As of December 31, 1999, the PXP Profit Sharing Plan had 193 
participants.
    (h) The Phoenix Investment Partners, Ltd. Group Life Insurance Plan 
(the PXP Group Life Plan) is a welfare benefit plan. As of December 31, 
1999, the PXP Group Life Plan had 493 participants.
    (i) The Phoenix Investment Partners, Ltd. Group Long Term 
Disability Plan (the PXP Long Term Disability Plan) is a welfare 
benefit plan. As of December 31, 1999, the PXP Long Term Disability 
Plan had 359 participants.
    3. On April 20, 2000, Phoenix's Board of Directors (the Board) 
authorized management to develop the Plan of Reorganization pursuant to 
which Phoenix would be converted from a mutual life insurance company 
to a stock life insurance company. Phoenix's Board of Directors adopted 
the Plan of Reorganization on December 18, 2000.
    Under the Plan of Reorganization, Phoenix will convert from a 
mutual life insurance company to a stock life insurance company by 
operation of New York law. The ultimate result of the transaction will 
be a structure in which all of Phoenix's stock will be held by the 
Holding Company, which has been organized under Delaware law for this 
purpose. Eligible Policyholders of Phoenix will receive Holding Company 
Stock or, in certain cases, Cash or Policy Credits, and the membership 
interests and rights to surplus of Phoenix policyholders will be 
extinguished.\5\
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    \5\ The proceeds of the demutualization will belong to a Plan if 
they would be deemed to be owned by the Plan under ordinary notions 
of property rights. See ERISA Advisory Opinion 92-02A, January 17, 
1992 (assets of plan generally are to be identified on the basis of 
ordinary notions of property rights under non-ERISA law). It is the 
view of the Department that, in the case of an employee welfare 
benefit plan with respect to which participants pay a portion of the 
premiums, the appropriate plan fiduciary must treat as plan assets 
the portion of the demutualization proceeds attributable to 
participant contributions. In determining what portion of the 
proceeds are attributable to participant contributions, the plan 
fiduciary should give appropriate consideration to those facts and 
circumstances that the fiduciary knows or should know are relevant 
to the determination, including the documents and instruments 
governing the Plan and the proportion of total participant 
contributions to the total premiums paid over an appropriate time 
period. In the case of an employee pension benefit plan, or where 
any type of Plan or trust is the policyholder, or where the policy 
is paid for out of trust assets, it is the view of the Department 
that all of the proceeds received by the policyholder in connection 
with a demutualization would constitute plan assets. If the 
demutualization proceeds belong to a Plan, the appropriate plan 
fiduciaries must take all necessary steps to safeguard such assets 
in order to avoid engaging in a violation of the fiduciary 
responsibility provisions of the Act.
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    An initial public offering (IPO), in which shares of Stock will be 
sold for cash, is to occur on the effective date of the reorganization. 
The Holding Company will contribute a portion of the proceeds from the 
IPO to Phoenix in an amount at least equal to the amount required to 
pay Cash and fund the crediting of Policy Credits to Eligible 
Policyholders who are to receive such consideration. As promptly as 
possible (but no later than 60 days) after the effective date of the 
reorganization, the Holding Company will pay, or cause Phoenix to pay, 
Cash or Policy Credits to Eligible Policyholders entitled under the 
Plan of Reorganization to receive such consideration.
    The Holding Company will be a publicly-traded company, and an 
application will be made to list its stock on the New York Stock 
Exchange.
    4. The main purpose of the reorganization is to demutualize Phoenix 
so that, as a stock insurance company subsidiary of the Holding 
Company, it can increase its potential for long-term growth and 
financial strength. A public structure would best enable Phoenix to 
accelerate its wealth management strategy and to grow its existing 
business and develop new business opportunities in the insurance and 
financial services industries. The Board believes that, by becoming a 
stock company, Phoenix will be able to raise money more efficiently and 
have greater flexibility to acquire other companies using the Holding 
Company Stock as acquisition currency. This would enable Phoenix to 
increase its market leadership, financial strength and strategic 
position, providing additional security to its policyholders.
    Additionally, access to capital markets will enable Phoenix to 
invest in new technology, improved customer service, new products and 
channels of distribution. The Board also believes that the 
reorganization will enable Phoenix to enhance its position as a premier 
provider of wealth management products and solutions, distributed 
through a wide variety of financial advisors and financial 
institutions, and to serve the wealth accumulation, preservation and 
transfer needs of the high net worth and affluent markets. Phoenix will 
also obtain more financial flexibility with which to maintain its 
ratings and financial stability and be able to better attract, retain 
and provide incentives to management in a fashion consistent with other 
stock life insurance companies. As a mutual life insurer, Phoenix can 
increase its capital

[[Page 19537]]

only through retained surplus contributed by its businesses or through 
the sale of surplus notes or similar instruments issued by it. Neither 
source is fully adequate to generate substantial surplus accumulations 
or to provide permanent capital to Phoenix.
    The reorganization will make it easier for Phoenix to benefit from 
changes in laws relating to affiliations between insurance companies 
and other types of companies, such as banks. These changes include the 
Gramm-Leach-Bliley Act of 1999, which permits mergers that combine 
commercial banks, insurers and securities firms under one holding 
company. Until the passage of the Gramm-Leach-Bliley Act, legislation 
had limited the ability of banks to engage in securities-related 
businesses and had restricted banks from being affiliated with 
insurance companies. In addition, Phoenix, as a stock insurer that is a 
subsidiary of the Holding Company, will have access through the Holding 
Company to the capital markets, enabling Phoenix to obtain capital from 
a variety of sources.
    5. Phoenix will compensate the Eligible Policyholders for their 
respective policyholders' membership interests, which will be 
extinguished as part of the reorganization, by giving them shares of 
Stock, Cash or Policy Credits. The economic value of this compensation 
is not available to the Eligible Policyholders so long as Phoenix 
continues its operations as a mutual company. However, the 
reorganization will not in any way reduce the benefits, values, 
guarantees or dividend eligibility of existing policies or contracts 
issued by Phoenix. All of Phoenix's policyowner obligations remain in 
force and will not be affected by the Plan of Reorganization.
    6. Section 7312 of the New York Insurance Law (Section 7312) 
establishes an approval process for the reorganization of a life 
insurance company organized under New York law. The Plan of 
Reorganization must be approved both by the Superintendent and by the 
Eligible Policyholders.
    Under Section 7312, the conversion of a mutual life insurance 
company to a stock company is initiated by the board of directors of 
the mutual company. The Plan of Reorganization may be approved only by 
a vote of at least 75% of the entire board of directors. The approval 
must include a finding that the Plan of Reorganization is fair and 
equitable to Eligible Policyholders.
    After approval by the mutual insurance company's board of 
directors, the Plan of Reorganization is then required to be submitted 
to the Superintendent for his or her review. In order for the Plan of 
Reorganization to become effective, the Superintendent must determine 
that the Plan of Reorganization does not violate the requirements 
imposed by Section 7312.
    In order to aid the Superintendent in discharging his or her 
duties, Section 7312 permits the Superintendent to appoint an 
independent actuary to review actuarial aspects of the Plan of 
Reorganization. In addition, Section 7312 permits the Superintendent to 
appoint other qualified disinterested persons or institutions to act as 
consultants to the Superintendent. In the case of the Phoenix 
reorganization, the Superintendent retained The Blackstone Group to 
provide financial advice, Clifford Chance Rogers & Wells LLP to provide 
legal advice and Arthur Andersen LLP to provide actuarial and auditary 
advice.
    Section 7312 also requires the Superintendent to hold a public 
hearing on a Plan of Reorganization which policyholders and other 
interested persons may express views on the Plan of Reorganization. 
Notice of the public hearing must be provided to each policyholder of 
the insurance company whose policy or contract is in force of the date 
of adoption of the Plan of Reorganization, and must be published in 
three newspapers of general circulation. The purpose of the public 
hearing is to allow interested persons to comment on the fairness of 
the terms and conditions of the Plan of Reorganization and the reasons 
and purposes for the reorganization of the insurer, and to consider 
whether the reorganization is in the interest of the insurer and its 
policyholders and is not detrimental to the public.
    After the public hearing, the Superintendent must determine whether 
or not to approve the Plan of Reorganization. Under Section 7312, the 
Superintendent approves the Plan of Reorganization if he or she finds 
that it does not violate the insurance law, that it is fair and 
equitable to policyholders, that it is not detrimental to the public, 
and that, after giving effect to the reorganization, the insurer will 
have an amount of capital and surplus that the Superintendent deems to 
be reasonably necessary for the company's future solvency.
    The Superintendent must also determine that the Plan of 
Reorganization does not fail to meet the following requirements of 
Section 7312(c):
    (a) the Plan of Reorganization demonstrates a purpose and specific 
reasons for the proposed reorganization;
    (b) the Plan of Reorganization is in the best interest of the 
mutual life insurer and its policyholders;
    (c) the Plan of Reorganization is fair and equitable to the 
policyholders;
    (d) the Plan of Reorganization provides for the enhancement of the 
operations of the reorganized insurer; and
    (e) the Plan of Reorganization will not substantially lessen 
competition in any line of insurance business.
    The Eligible Policyholders of the mutual insurance company must 
also be provided with notice of the Plan of Reorganization and an 
opportunity to vote whether to approve the Plan of Reorganization. Each 
policyholder is entitled to one vote, and the Plan of Reorganization 
must be approved by a vote of at least two-thirds of all votes cast by 
policyholders entitled to vote.
    A decision by the Superintendent to approve a Plan of 
Reorganization pursuant to Section 7312 of the New York Insurance Law 
is subject to judicial review in the New York courts.
    7. Phoenix's Plan of Reorganization provides for Eligible 
Policyholders, whose membership interests in the mutual company will be 
extinguished in the reorganization, to receive Stock, Cash or Policy 
Credits. For this purpose, an Eligible Policyholder generally is the 
owner of one or more policies that are in force on the date of the 
adoption of the Plan of Reorganization. In order to determine the 
amount of consideration to which each Eligible Policyholder is 
entitled, each Eligible Policyholder will be allocated (but, for those 
policyholders who do not receive Stock, not issued) a number of shares 
of Stock equal to the sum of (i) a fixed number of 37 shares of Stock 
(subject, with the approval of the Superintendent, to proportional 
adjustment in respect of the initial public offering) and (ii) where 
the Eligible Policyholder owns one or more participating policies, an 
additional number of shares based on actuarial formulas that take into 
account each participating policy's past and expected future 
contributions to the surplus of Phoenix.
    Certain Eligible Policyholders will receive Cash or Policy Credits 
instead of Stock. The amount of Cash or Policy Credits shall be 
determined by reference to the price per share at which the Stock is 
offered to the public in the initial public offering and the number of 
shares allocated to such Eligible Policyholders.
    Certain Eligible Policyholders, namely owners of individual 
retirement annuities, tax sheltered annuities, or certain other 
policies issued directly to participants in qualified pension or 
profit-sharing plans, will receive Policy

[[Page 19538]]

Credits equal in value to the Stock allocated to such Eligible 
Policyholders.
    Certain other Eligible Policyholders will receive Cash instead of 
Stock. These Eligible Policyholders include:
    (a) Eligible Policyholders who are not required to receive Policy 
Credits in accordance with the preceding paragraph and (i) whose 
address for mailing purposes is shown on Phoenix's records to be 
located outside the United States of America or with respect to whom 
Phoenix, after a reasonable effort to locate such Eligible 
Policyholder, has a reasonable belief that the most recent address for 
mailing purposes as shown on Phoenix's records is an address at which 
mail to such Eligible Policyholder is undeliverable or (ii) with 
respect to whom Phoenix determines in good faith to the satisfaction of 
the Superintendent that it is not reasonably feasible or appropriate to 
provide consideration in the form of Stock; and
    (b) Eligible Policyholders who are allocated 60 or fewer shares of 
Stock and who have affirmatively indicated, on a form provided to such 
Eligible Policyholder that has been properly completed and received by 
Phoenix prior to a date set by Phoenix and approved by the 
Superintendent, a preference to receive Cash in lieu of Stock.
    All Eligible Policyholders that are Plans will participate on the 
same basis as Eligible Policyholders that are not Plans. The terms of 
the transaction will be at least as favorable to the Plans as an arm's-
length transaction with unrelated parties.
    The Plan of Reorganization also provides that the Holding Company 
will establish a commission-free purchase and sale program which will 
begin no sooner than the first business day after the six-month 
anniversary of the effective date of the reorganization and no later 
than the first business day after the twelve-month anniversary of the 
effective date of the reorganization and will continue in either case 
for 90 days (and may be extended if the Board determines such extension 
to be appropriate and in the best interest of the Holding Company and 
its stockholders). Pursuant to such purchase and sale program, each 
Eligible Policyholder or other stockholder who holds 99 or fewer shares 
of Stock will have the opportunity to sell at prevailing market prices 
all, but not less than all, the shares of Stock owned by such 
stockholder, without paying brokerage commissions, mailing charges, 
registration fees or other administrative or similar expenses. The 
Holding Company will concurrently offer each stockholder entitled to 
participate in the purchase and sale program the opportunity to 
purchase that number of shares of Stock necessary in order to increase 
such stockholder's holdings to a 100-share round lot, without paying 
brokerage commissions, mailing charges, registration fees or other 
administrative or similar expenses. The purchase and sale arrangements 
described in the Plan of Reorganization will be subject to such 
limitations as are agreed upon between the Holding Company and the SEC.
    8. Several Phoenix Plans are expected to be Eligible Policyholders 
entitled to receive consideration in connection with the implementation 
of the Plan of Reorganization. Phoenix has retained U.S. Trust Co., 
N.A. to serve as independent fiduciary for these Plans in connection 
with the implementation of the Plan of Reorganization. U.S. Trust will 
determine whether the Plan of Reorganization is in the best interest of 
such Plans and their participants and beneficiaries, and it will vote 
at the special meeting of Eligible Policyholders on the proposal to 
approve or not to approve the Plan of Reorganization. If the vote is to 
approve the Plan of Reorganization, U.S. Trust will make, on behalf of 
each affected Phoenix Plan, any decisions available under the Plan of 
Reorganization regarding the receipt of consideration in the form of 
Stock, Cash or Policy Credits. Additionally, U.S. Trust will monitor, 
on behalf of the affected Phoenix Plans, the acquisition and holding of 
any consideration received, make determinations on behalf of the 
Phoenix Plan with respect to voting and the continued holding of the 
Stock received by such Plan, dispose of any Stock held by the Phoenix 
Plan which exceeds the limitation of section 407(a)(2) of the Act as 
reasonably as practicable but in no event later than six months 
following the effective date of the demutualization, and take all 
actions that are necessary and appropriate to safeguard the interests 
of the Phoenix Plans. Further, U.S. Trust will provide the Department 
with a complete and detailed final report as it relates to the Phoenix 
Plans prior to the effective date of the demutualization. Finally, U.S. 
Trust states that it has conducted a preliminary review of Phoenix's 
Plan of Reorganization and it sees nothing in the Plan that would 
preclude the Department of Labor from proposing the requested 
exemption.
    9. In summary, it is represented that the proposed transactions 
will satisfy the statutory criteria for an exemption under section 
408(a) of the Act because:
    (a) The requested exemption will be administratively feasible 
because the Plan of Reorganization will be implemented pursuant to 
stringent procedural and substantive safeguards imposed under New York 
law and supervised by the Superintendent. Furthermore, each Eligible 
Policyholder will have an opportunity to determine whether to vote to 
approve the terms of the Plan of Reorganization and will also be solely 
responsible for any decisions that may be permitted under the Plan of 
Reorganization regarding the form of consideration to be received in 
the reorganization. Because of the extensive protections afforded to 
Plans under New York law, no ongoing involvement by the Department of 
Labor is required in order to safeguard the interests of Plan 
policyholders.
    (b) The requested exemption will be in the interest of the 
participants and beneficiaries of the Plans that are policyholders 
because the requested exemption would allow ERISA-covered Eligible 
Policyholders, whose membership interests in Phoenix are canceled in 
the reorganization, to acquire Stock or other valuable property. To the 
extent distributions are made in the form of Stock, Eligible 
Policyholders that are Plans will have an opportunity to participate in 
Phoenix's future earnings through any stock dividends and any 
appreciation in the value of their Stock while they hold the Stock, 
and, because the Stock will be publicly traded, they will have an 
opportunity to sell their holdings of Stock if they decide that it is 
appropriate to do so. In addition, because the reorganization is 
expected to enhance Phoenix's ability to access the capital markets, 
implementation of the Plan of Reorganization will benefit all 
policyholders. The reorganization will not, in any way, change premiums 
or reduce policy benefits, values, guarantees or other policy 
obligations of Phoenix to its policyholders and contract holders.
    (c) The proposed transaction will protect the rights of Plans that 
are Eligible Policyholders because each such Plan, like other Eligible 
Policyholders, will have an opportunity to comment on the Plan of 
Reorganization and because one or more independent fiduciaries of each 
Eligible Policyholder that is a Plan will have an opportunity to decide 
whether to vote to approve the Plan of Reorganization after disclosure 
of its terms. Moreover, as discussed above, the Superintendent must 
make an independent determination that the Plan of Reorganization is 
fair and equitable to

[[Page 19539]]

Phoenix's policyholders, including Plan policyholders.

FOR FURTHER INFORMATION CONTACT: Karen Lloyd of the Department, 
telephone (202) 219-8194. (This is not a toll-free number).

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which, among other things, require a fiduciary 
to discharge his duties respecting the plan solely in the interest of 
the participants and beneficiaries of the plan and in a prudent fashion 
in accordance with section 404(a)(1)(b) of the Act; nor does it affect 
the requirement of section 401(a) of the Code that the plan must 
operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 11th day of April, 2001.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 01-9347 Filed 4-13-01; 8:45 am]
BILLING CODE 4510-29-P